Does GDP tell you anything about how people feel? The new Better Life Index finds other ways to measure quality of life – and maybe it can tell you which should be your new favourite country…
Is there more to life than consumption? That’s what a lot of politicians and academics have been wondering lately – and they’ve come up with some new ways to measure well-being. Sophia Wistehube asks what these new measures can really tell us…
What makes up a better quality of life?
Launched this year on the occasion of the 50th anniversary of the OECD, the Better Life Index aims at comparing the world’s well-being beyond the cold numbers of GDP. This alternative measure includes 20 different indicators across 11 topics OECD has identified as essential. Designed as an interactive tool, it allows users to compare well-being across the OECD’s 34 member countries by changing the weight of each sector according to their own view of its importance.
Housing, income, jobs and work-life balance, community, education, air-pollution, governance, as well as health, safety and life-satisfaction. How can you even decide which of these is the most important? If you rate all those aspects of a good life equally, you will find the Scandinavian countries coming first, next to Australia, New Zealand, Canada. Having played around with the index, I realised that the ranking doesn’t change all that much. The indicators seem to be strongly interrelated. Actually, as the Economist has found out, there is a strong correlation between the Better Life Index and GDP per capita.
GDP measures everything – except the things which make life worthwhile
Still, criticism of the GDP as a measure for well-being has been going on for quite a while. For some time, there have been calls for a new index to measuring well-being more directly. Certainly, GDP is straightforward and easy to comprehend. You just have to look at the huge pile of goods and services that have been bought in order to figure out how well a society is doing. However, it does have some defects. Suppose someone robs you or your house burns down. You have to buy all your stuff anew, some of it you will have lost forever. Still, the GDP rises. Other examples are sitting in traffic (increases fuel consumption), an oil spill (and the repairs involved), or an epidemic (more vaccines will be sold). On the other hand, if you work in a voluntary capacity, you might do an important job, maybe even one which people would have been kept from paying for by their sense of fairness. Your work might enhance community life and make living more worthwhile for everyone affected. However, your efforts don’t count towards GDP.
You might think that those are minor inaccuracies. However, lately, it has become more and more clear that GDP has lost its predictive efficiency. Although the economic output of some countries like the UK, Germany or France keeps on growing, the level of happiness stagnates or even declines. In those individual cases the correlation between well-being and economic growth has been capped. Moreover, growth was much higher in the USA before the crisis than in Europe. That was only made possible through the Americans’ excessive debts. Still, GDP didn’t take the instability of such growth rates into account. It failed to give meaningful information about the state of the economy.
Europeans take the lead
That’s why Nicolas Sarkozy convened a blue ribbon commission around noble prize winners Joseph Stiglitz and Amartya Sen to come up with an alternative index of well-being. So far, they have made twelve suggestions for improvement which basically aim at attaching more weight to the individual’s well-being as well as the environmental compatibility of economic growth. The European Union also announced that it wants to introduce a growth index which will take environmental consequences into account. Angel Guerria, General Secretary of the OECD in Paris, said that his organisation wants to assume a leading role in developing and implementing a new prosperity index.
With its tool, the OECD wants to further the discussion about alternative measures and raise consciousness for the problems that any such standardised measure inevitably brings with it. Who decides how important each of those 11 topics really is? Moreover, the tool uses average values. However, several prominent studies indicate that equality is more important for overall well-being in a society than economic growth. Even the rich live shorter and are sicker in unequal societies. The Better Life Index reflects this trend to some extent: the more egalitarian countries in Scandinavia come off particularly well – better than they would according to their GDP. These findings seem to have reached the German Bundestag. Last year it appointed a commission of inquiry in order to create a prosperity index which also takes distributional justice and political participation into account.
However, one last mystery remains. Why do the countries I like most fare so badly on my own index? Am I wrong about them? Or even about myself? Maybe the Better Life Index isn’t that personal after all. To be fair, it focuses on areas of material living conditions and on the more objective criteria of quality of life. That still isn’t everything which makes life worthwhile. But considering the things which actually can be measured and – what is even more important – the things which lie in the province of politics, the Better Life Index constitutes a big step towards measuring what really does determine the good life.